Reduce Vedanta: target of Rs 120: ICICI Securities

ICICI Securities research report on Vedanta

Vedanta reported higher than expected Q1FY21 numbers. Aluminium EBITDA constituted ~72% of the EBITDA beat. The segment’s EBITDA/te surprised at US$360/te, of which US$101/te was on account of RPO liability reversal. Adjusted for RPO liability, costs reached US$1343/te, down ~US$110/te QoQ and ~US$420/te YoY. Power contributed ~12% of the EBITDA beat, which can be attributed to 97% Talwandi Sabo (TSPL) PAF, while sales from TSPL was only 643mn units (down 76% YoY). TSPL receivables reduced in FY20. There has been significant cost reduction in Zinc International (22% YoY and 24% QoQ) and currency depreciation of the host countries played a big part. Production at Gamsberg is still at 25kte as at June.

Outlook

Covid lockdown makes assessment difficult for Rajasthan assets. The delisting process is underway; US$300mn again has been extended as an intercompany loan to Vedanta resources. Downgrade to REDUCE from Hold.